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Think Mickey Mouse with the Olympic rings. That’s what ESPN is considering.

In an attempt to sweeten its Olympic bid next month, ESPN is tossing around the idea of supplementing its TV rights offer with a marketing deal from its parent company. A deal being considered would make Disney a member of The Olympic Partner (TOP) program, the International Olympic Committee’s marquee sponsorship group, and grant the entertainment company licensing and intellectual property rights.

Disney and ESPN executives haven’t made a final decision about how such a deal would be structured, and it’s unlikely the company would pay the $100 million over four years that other TOP partners pay. But senior sources close to the company’s bid believe a Disney sponsorship would distinguish it from its broadcast competitors during rights negotiations by marrying the Olympic rings with Disney’s immense global entertainment assets and familiar content popular with youth across the globe.

“We are exploring a number of possibilities as part of this process to determine the plan that makes the most business sense for our company,” said Rob Simmelkjaer, ESPN’s vice president of international development.

Putting forward such a marketing proposal would help ESPN keep up with NBC’s Olympic offer.

In 2003, during the last Olympic rights bidding, NBC’s parent company GE agreed to a $200 million deal to become a TOP sponsor for the 2005-08 and 2009-12 quadrenniums. That $200 million commitment was added to the $2 billion NBC bid for the 2010 and 2012 Olympics, bringing the total value of the deal to $2.2 billion and dwarfing other bids.

Last month, GE said that it will be at the table with NBC again to renegotiate its TOP deal in conjunction with the network’s effort to retain the Olympic broadcast rights. GE’s proposal could sweeten NBC’s bid by adding more than $100 million in sponsorship fees to NBC’s bid.

GE has indicated it would pay more for a TOP

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ESPN believes the potential for combining the Olympic rings and Disney content could set it apart from other rights bidders.

sponsorship than Disney, but ESPN executives hope the IOC might find a Disney deal more attractive because of the company’s ability to connect the IOC with a younger demographic. The IOC is looking for ways to remain relevant with youth at a time when kids often spend more time on the computer or playing video games than participating in or following Olympic sports. Disney’s connection with youth — through its channels and movies, gaming division, theme parks and popular characters like Mickey Mouse — could allow the IOC to promote the value of sports to young people, in addition to marketing its five-ring logo.

There is no precedent for the IOC signing a TOP deal that includes licensing rights, so it’s unclear how a deal with Disney would work.

Currently, the IOC passes on licensing rights to local Olympic organizing committees that sign licensing deals for an array of products they plan to sell in the six years preceding an Olympics, as well as during the Games and afterward. Disney likely would be among those licensees that work with an organizing committee, Olympic licensing experts said.

The IOC plans to hold bidding June 6-7 in Lausanne, Switzerland, for the 2014 Sochi and 2016 Rio de Janeiro TV rights package. IOC leaders have said they expect to match or exceed the $2 billion that NBC paid in 2003.

The market for sports rights fees has been red-hot in the United States this year, with ESPN, Fox and NBC paying increasingly high amounts for the media rights to properties such as the Pac-10, NHL and Big 12.

In Lausanne, networks will be given two hours to make a presentation illustrating how they will present the Games. Then they will submit a sealed bid containing what they are willing to pay for the rights. The IOC will determine who wins the rights based on the presentations and the size of the bids.

NBC, ESPN and Fox are considered the most serious bidders. CBS and Turner have met with the IOC but have not shown the same level of interest in the rights to date.

Indianapolis Motor Speedway President Jeff Belskus ascended the track’s Pagoda Tower at the start of the 2010 Indianapolis 500 and surveyed the crowd. The sight of the more than 250,000 spectators in attendance stirred him, but his sense of excitement faded when he caught a glimpse of the track’s north turn. The stands were thin.

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A decline in attendance and viewership has taken some of the prestige out of the Indy 500.

Indianapolis Motor Speedway doesn’t release attendance figures for the Indy 500, but press reports have chronicled attendance declines for several consecutive years. At the same time people stayed away from the track, fewer tuned in to watch the race on ABC. Ratings for the marquee event slid steadily before hitting an all-time low last year with a 3.6 Nielsen rating and 5.7 million viewers.

The attendance and viewership decrease has taken some of the shine off racing’s greatest spectacle. What was once a powerhouse national sporting event has slipped from its perch. Though it’s still mentioned along with the Masters and Kentucky Derby, it fails to captivate the casual sports fan the same way the others do.

“It’s still a huge, must-go-to event, but in terms of being the centerpiece of the IndyCar Series, it doesn’t have that pull or level of importance it once had,” said Mark Coughlin, Octagon Racing Group’s executive vice president and chief operating officer. “If you had asked someone in the mid-’80s to mid-’90s who won the Indy 500, a general sports fan might know. I don’t know if that would be the case now.”

Andrew Craig, the former CEO of CART, added, “The Indianapolis 500 was always the pre-eminent race on the American calendar, but it’s lost some of the magic.”

Belskus, who took over as speedway president in 2009, is working to restore some of the event’s national appeal. As the speedway celebrates the centennial running of the first Indianapolis 500 this month, he sees signs that recent changes ranging from new staff to new events are paying off. Ticket sales are up 5 percent, suites are sold out and three new, blue-chip sponsors have signed on for the 500.

“We’ve been through one of the most difficult economic times in recent years,” Belskus said. “It’s resulted in a lot of softness in a lot of areas. We seem to be coming back. In fact, we are coming back.”

Looking into the future, Belskus envisions an event with higher ratings, more national promotions by sponsors and a sold-out venue. He believes it’s achievable in three to five years but acknowledges that doing it will involve overcoming the past.

Recovering from split

INDIANAPOLIS MOTOR SPEEDWAY
Some 60,000 people watched the first Indianapolis 500 100 years ago.

The Indianapolis 500 was born 100 years ago when the four owners of the Indianapolis Motor Speedway hosted the track’s first 500-mile race. Some 60,000 spectators turned out for the event, and it quickly distinguished itself as the most prestigious race in America.

Over the years, the race added traditions the way young girls once added charms to their bracelets. Fans sang “Back Home Again in Indiana,” drivers drank milk after winning, and race winners ranging from Mario Andretti to A.J. Foyt to Bobby Unser became heroes.

But in 1994 the event began to lose some of its luster.

Indianapolis Motor Speedway President Tony George announced that he planned to leave the established open-wheel series known as CART and form a new league known as the Indy Racing League. The IRL ran its first race in 1996, and the sport split.

Teams, drivers and sponsors picked a series, and many gave up the Indianapolis 500, which George initially used as leverage to prod teams to join the IRL. Marquee teams with star drivers such as Ganassi Racing, Penske Racing and Bobby Rahal Racing sided with CART and didn’t compete in the Indy 500. Sponsors like Miller Brewing Co. stuck with their team and ended their relationship with IMS.

“Sticking around with the Indy 500 wasn’t an option,” said Steve Lauletta, a former Miller sponsorship executive who is now the president of Chip Ganassi Racing. “We went to renew the deal [with Indianapolis Motor Speedway] and it went from just Indy to several other races in markets that didn’t make sense. The IRL was an unproven thing, and we wanted to keep the one that was proven. You had to pick sides.”

Several other sponsors such as Budweiser, Pennzoil and Domino’s dropped their support of the Indy 500, too. As a result, the race lost the national promotions those companies provided.

Viewers also abandoned the race. Up until the split, the event consistently earned more than an 8.0 Nielsen rating and 11 million viewers. After the 1996 split, it earned a 6.6 rating and 8.4 million viewers. A year later it was down to a 4.3 rating and 5.9 million viewers. It hovered in that range for most of the last decade, spiking once in 2005 to a 6.5 rating and 9.7 million viewers for a race Danica Patrick led with 10 laps to go.

The consequences of the split were compounded by the rise of NASCAR. Three years after CART and the IRL diverged, NASCAR signed its first centralized television deal with Fox, NBC and Turner. The deal gave the sport better promotional exposure on TV, and its ratings rocketed upward as open-wheel racing’s ratings declined.

Motorsports observers say NASCAR also may have hurt attendance at the Indy 500. The speedway added a NASCAR race in 1994, and Craig said the move cannibalized some of the regional interest in attending the Indy 500 because the track was no longer reserved for one special motorsports event. It had two major races, and even more after it later began hosting Formula One and Moto GP races.

“Inevitably, if you chip away at these things, it cuts into the appeal,” Craig said. “The split didn’t help at all. It never really came back.”

Capitalizing on a centennial

Belskus and IndyCar Series CEO Randy Bernard are focused on reversing the trends of the last decade. The series reunified three years ago, and they believe open-wheel racing’s signature event is positioned to regain some of its national prominence.

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Since taking over as president of Indianapolis Motor Speedway in 2009, Jeff Belskus has been working to restore some of the sport’s national appeal.

“In early 2008, you were going through the reunification process between IndyCar and Champ Car, and there was a good feeling,” Belskus said. “That’s taken a few years to translate into positive results. You combine that with this 100-year anniversary stuff and it puts us in a real good place right now.”

The speedway launched a three-year celebration of the centennial in 2009. After replacing Joie Chitwood as CEO that year, Belskus changed some of those promotional plans and took steps to shore up the speedway’s finances. The track laid off at least 70 employees, privatized a golf course and catering service, closed a motel operation and cut the number of events it hosted in May by a third. All of it was designed to make the facility more efficient.

In an effort to boost ticket sales, Belskus hired Mark Dill and James Newton as the vice president and director of marketing, respectively. Dill came with a marketing background from Nortel Networks, and Newton had experience as a field marketing manager for Red Bull.

In addition to those hires, Belskus restructured the ticket operations, creating the speedway’s first group sales team. He also looked to add new events for sponsors.

This year the track created an Emerging Tech Day, the “Back Home Again In Indiana” tour in 26 Indiana communities, and a Celebration of Automobiles competition featuring more than 250 vintage cars. Allison Transmission, AT&T and The Indianapolis Star signed on as the presenting sponsor of each. Belskus said sponsorship revenue from the Emerging Tech Day, which showcased sustainable auto technology, provided a six-figure boost to the speedway’s bottom line.

The speedway invited every living driver who competed in an Indy 500 to what it’s calling the “World’s Largest Autograph Session” scheduled for May 28. Legends such as Johnny Rutherford and Bobby Unser have committed to attend.

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IndyCar Series sponsor Izod held a party in March in New York City celebrating the Indy 500’s milestone. Open-wheel drivers past and present took part, including (left to right) Mario Andretti, Helio Castroneves, Ryan Briscoe and Simona de Silvestro.

“What Jeff’s trying to do bringing back past champions is a wonderful idea,” said Matt Petersen, Momentum Worldwide’s director of motorsports. “The pageantry they’re building upon with the centennial has been an impetus for me and others to think about watching and engaging in the event.”

Belskus credited the centennial with contributing to a 5 percent increase in ticket sales, the sellout of 128 suites, strong hospitality sales and the addition of sponsors Kroger, Mattel, Verizon, Shell and Allison Transmission.

ESPN’s “SportsCenter” is showing historic highlights from the Indy 500 throughout the month of May, and Belskus said that should help increase TV viewership, as well.

An increase would be a major benefit to the track and the IndyCar Series, whose five-race agreement with ABC is up for renewal after this season. The parties currently receive more than $6 million a year for the package. They hired IMG to assist with the TV rights negotiations and plan to seek more promotion and marketing support in the next deal.

Securing future support

Increasing its ratings is critical to the Indy 500’s future. Just Marketing International President Jon Flack said the declining ratings have meant that while the 500 still holds tremendous strength for business-to-business and customer entertainment, corporations are less reliant on the event to build a brand through television advertising.

The event needs corporate advertisers to promote the race nationally in order to increase ratings and restore its national significance.

“You have to get sponsors to get [the event] past the IndyCar fan and the motorsports fan,” Lauletta said. “That was lost over a period of time when you had these two [series]. The promotion wasn’t the same.”

This year’s Indy 500 has made some strides to restore that promotional support. Shell is back as a sponsor of a team for the first time since 2002 and signed on to sponsor the race, as well. It is promoting its affiliation across the U.S. by featuring Penske Racing driver Helio Castroneves in a campaign that promotes its Shell V Power fuel nationwide in print advertisements. But Heidi Massey-Bong, Shell’s senior business adviser for motorsports, said the company’s heaviest promotions — a $10 voucher good for a pole weekend ticket — are taking place in the Midwest region where interest in the event is strongest.

MATTEL
Mattel is using the Indy 500 for a publicity stunt by launching a race car off a giant ramp that resembles one of its Hot Wheels track sets.

Others sponsors are making similar efforts to promote their relationship with the event. Izod, the IndyCar Series’ title sponsor, continues to promote the history of the Indy 500 outside the Midwest. It held a media event in New York earlier this month and decorated six windows at the city’s Herald Square Macy’s with Indy-related themes. And Mattel is doing a massive publicity stunt at the track in which a crew of stunt drivers will try to break the world record for a distance jump in an automobile by launching a race car off a ramp that resembles one of its Hot Wheels track sets.

Observers say activations like that will raise the Indy 500’s profile, but a great deal of the event’s future success will be contingent upon the success of the IndyCar Series. The more recognizable the series’ drivers become and the amount of interest it generates with the new car it plans to adopt in 2012, the more the Indy 500 will benefit.

“The next couple of years are going to be a big proving ground,” Bernard said. “The Indy 500 was always about who could bring the best car and best driver and win the best race of all time. They lost that. I’m optimistic that will come back in 2012.”

Belskus is similarly optimistic about the future. He believes the economic headwinds that tested the speedway the last few years have passed, and he believes the track is poised to increase its ticket sales in coming years.

“Getting to that goal of selling this place out, we know it’s not going to happen in 2011, but is it achievable in three to five years?” Belskus said. “Yeah, I think it is.”

In a move that could affect bidding for future Olympic TV rights, the U.S. Olympic Committee has expanded its sales partnership with NBC Sports beyond the financial services sector to also include the home improvement category.

The organization and network will collaborate to sell a home improvement sponsorship and advertising package the same way they sold the online brokerage and banking categories to TD Ameritrade and Citi, respectively.

The move underscores the USOC’s belief that a joint advertising-sponsorship package appeals to potential sponsors and increases the likelihood that the USOC will partner with a network on sponsorship and advertising sales for the 2014 and 2016 Olympics. The approach is welcome news to the major networks, as such a decision could affect how much networks are willing to pay for Olympic rights by making future advertising packages more lucrative for a network and easier to sell.

The International Olympic Committee plans to sell the TV rights to the 2014 and 2016 Olympics on June 6-7 in Lausanne, Switzerland. ESPN, Fox and NBC are expected to bid. CBS and Turner have met with the IOC but have not shown the same level of interest in the rights to date.

As the bidding approaches, networks have contacted the USOC in an effort to gauge the organization’s willingness to package sponsorship rights with advertising for the 2014 and 2016 Games. A senior executive familiar with those conversations said the USOC told networks that it would be open to partnering with them on as many as six domestic sponsorship categories such as automotive, financial services and home improvement but would not be willing to partner on all categories or sell the network its marketing rights the same way colleges do. It currently has 13 domestic sponsors.

Such a partnership wouldn’t revolutionize the USOC’s business model but it would reshape it. While other properties have required sponsors to make media commitments as part of a deal, USOC sponsorship agreements historically included rights only to the USA five-ring logo. That left NBC to negotiate separate advertising buys with sponsors, and several sponsors declined to advertise, as Home Depot did during the 2008 Beijing Games, putting NBC in a difficult position as it tried to meet its sales goals.

That all changed last fall when the USOC and NBC collaborated to sell a sponsorship and media rights package in the financial services category for the 2012 London Games. The USOC, represented by longtime Olympic sales expert Rob Prazmark, and NBC, represented by Paul Wilson, vice president of Olympic sales, signed TD Ameritrade and Citi to separate media-driven deals valued at more than $50 million combined.

It’s unclear how the USOC and NBC split the money from the banking category. Sources familiar with it said a small portion of that money was set aside to cover the USOC sponsorship value, and the rest went toward NBC’s advertising sales for the London Games.

The USOC and NBC initially partnered on the banking category because the USOC was uncertain it would be able to find a bank partner prior to the 2012 Olympics. People familiar with the Citi negotiations said the deal was pitched to the bank as an ad buy with a sponsorship as a sweetener. The combination made it more appealing to the bank than a straight ad buy or straight sponsorship deal.

The USOC’s recent conversations with networks signal it is open to similar partnerships in other categories with whatever network wins the 2014 and 2016 Olympic rights. Its only conditions would be that it would want someone representing it at the table during joint sponsorship and advertising negotiations and it would keep sole responsibility for managing its marks and servicing new sponsors.

These types of combined deals would also make it less likely other brands could ambush a USOC sponsor because the sponsor would be purchasing advertising exclusivity up front in its combined sponsorship and advertising deal.

“It appears the USOC has maintained control of the rights and that the Olympic parties will be able to better manage ambush issues in the future,” said Davis Butler, president of Encompass, a global marketing agency, and a former IOC executive. “The piece we don’t know yet is if this is a media buy that maximizes revenue short term or if these deals will result in long-term sponsors who stick around and support the USOC in the future.”

Partnering with a network could carry other risks for the USOC. The organization’s sales cycle begins far earlier than NBC’s does. It currently sells sponsorships for a four-year period and receives four annual payments from its domestic partners. But NBC sells advertising in the year prior to each Olympic Games and gets paid after an Olympics ends.

The USOC’s conversations with networks indicate that it would be comfortable with being paid after an Olympics or open to finding a way to make up for the gap in its annual budget by filling other domestic categories that it doesn’t share with the network. The organization currently receives about 6 percent of its annual budget of $200 million from domestic sponsorship, which means that sharing six of 13 categories with a network would be worth approximately $4 million to $6 million.

Partnering with the USOC won’t be a cure-all solution for a network, either. The IOC’s worldwide sponsorship, The Olympic Partner (TOP) program, still doesn’t require sponsors to commit to an advertising buy with Olympic rights holders. As a result, TOP sponsors such as Panasonic, Acer and Samsung can elect not to make ad buys in the U.S. during the Olympics. TOP sponsors get USOC rights, along with 199 other national governing bodies, as part of their IOC deal.

“The IOC will definitely watch this, and there may be some elements from this that they consider doing something with in the future,” Butler said.

With TV viewership on the rise, gripping story lines and a nearly sold-out year for title sponsorships, the PGA Tour could not be more pleased as it enters negotiations for a new media deal.

Those talks are expected to kick off in the next month and when they do, the tour knows it will accentuate each of those points with its broadcast partners, CBS and NBC. And by waiting a few more weeks, the tour hopes to have one more factor working in its favor: Tiger Woods back on top.

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Rickie Fowler, and his recognizable orange Sunday garb, is part of the PGA Tour’s “New Breed.”

That hasn’t been the case so far. Woods withdrew on the first day of last week’s Players Championship, citing injuries, and before that had played in four tour events in 2011, finishing 10th, 24th, 33rd and 44th — hardly the kind of performance that drives ratings.

But TV numbers are up anyway, even without Woods’ considerable influence. Average weekend ratings on CBS and NBC have jumped 29 percent, and average viewership is up 26 percent against the same events in 2010. Only one of the tour’s first 13 events on NBC or CBS — the Transitions Championship on March 19-20 on NBC, during the first weekend of the NCAA tournament — dropped from last year’s viewership levels.

The TV numbers come as a relief at PGA Tour headquarters in Ponte Vedra Beach, Fla., where the golf industry descended last week for the Players Championship. The audience numbers so far this season put the tour back on par with 2009, after a 2010 in which ratings suffered a staggering drop, largely credited to Woods’ first winless season as a pro.

“I wouldn’t say we’re surprised” with the ratings rebound, said Rick Anderson, the PGA Tour’s executive vice president and chief legal counsel, who has worked on the tour’s TV contracts since the mid-1990s. “When you look across our ratings history, there’s always been a stable rating that golf delivers. There’s no question that Tiger spikes ratings and attendance, but Tiger has always played only a certain number of events and the other events have continued to flourish. That’s because there has been that solid golf audience week in and week out.”

PGA Tour TV ratings

NETWORK

2010*

2011

% INCREASE

CBS

1.3

1.8

39%

NBC

1.5

1.7

13%

Combined

1.4

1.8

29%

PGA Tour viewership

NETWORK

2010*

2011

% INCREASE

CBS

1.898M

2.686M

42%

NBC

2.175M

2.448M

13%

Combined

2.040M

2.568M

26%

Note: Through May 1, a cumulative audience of 112.9 million people have tuned in to PGA Tour telecasts in 2011, up 2% over 2010.
* Does not include the 2010 Waste Management Phoenix Open because it aired entirely on Golf Channel.
Source: The Nielsen Co.

By the end of last season, just six months ago, golf’s stakeholders wondered whether the tour might take a step back in its rights fees from CBS and NBC. They are in the fifth year of a six-year deal that pays $2.95 billion combined, or an annual average of $491.7 million. Golf Channel has the exclusive cable rights for the tour as part of a 15-year deal that runs through 2021. ESPN’s golf deals with the Masters, British Open and U.S. Open are separate from the PGA Tour’s contracts, as is Turner’s deal with the PGA Championship.

The concerns that gripped the golf industry over ratings and rights fees eased this year as the ratings recovered and other properties negotiated significant increases in their media contracts. The tour also has been emboldened by its brand campaign, which pitted the up-and-comers against the established stars.

Last December, instead of seeing CBS and NBC in New York for its customary season-ending review, the tour invited the networks to its Ponte Vedra offices for separate meetings.

They talked about promoting the tour’s 2011 season with a more pointed message: They called it “New Breed vs. The Establishment,” and a variety of 30-second spots ran in the early-season golf broadcasts as well as other sports programming, such as college basketball.

“I think what we’ve seen is more coordination and maybe more consistency across what all of us are doing with the theme,” Anderson said of the tour’s network partners. “There’s more coordination, in terms of messaging. We weren’t necessarily thinking that we needed to make drastic changes, but we definitely talked about what more we could do to position the sport a certain way and promote the sport.”

Creating a brand campaign, of course, doesn’t assure that those story lines will play out on the golf course, but so far they have.

Bubba Watson has won twice and developed into an unplugged voice unafraid of rattling cages. Rickie Fowler, while not winning, has consistently contended, enough so that pundits are now growing weary of his all-orange Sunday garb. Other young players like Nick Watney, Johnny Vegas and Gary Woodland have not only won but also, perhaps more importantly, emerged as interesting characters with varied backgrounds.

The tour also got more creative with its Thursday and Friday pairings, matching up the best players to create more interest. It also used the “New Breed vs. The Establishment” theme in its pairings.

Average ratings on the two networks have responded (see chart). CBS is averaging a 1.8 rating through seven tournaments, up from a 1.3 last year, while NBC is averaging a 1.7 through six events, up from a 1.5.

Viewers also are watching an average of 51 minutes, an increase from 40 minutes last year.

“Honestly, you can have meetings around the clock and come up with the best plans in the world, but it’s ultimately up to the players and who’s in contention,” said Rob Correa, executive vice president of programming at CBS Sports, who questioned whether the tour is moving into an era of new stars to take the place of Woods, Phil Mickelson and Ernie Els.

“What’s encouraging about the ratings is that we’ve done that without Tiger, basically,” Correa said. “Are we seeing the transition into the post-Tiger, post-Mickelson, post-Ernie period? I don’t know. But if it is a changing of the guard, it’s certainly encouraging.”

How that plays in the tour’s next TV deal remains to be seen. Tour executives would not comment on how the strong start to the season might affect negotiations or what their expectations are. Earlier this year, tour officials conceded that they’d wait as long as they could this year in order for Woods to find his form before initiating talks.

The tour and its network partners do not have exclusive negotiating windows and those discussions could begin at the behest of either side.

Despite the tour’s strong performance so far this year, some of the market dynamics that have driven rights fees sky high for some properties might not be at work for golf. In the most recent cases of the NHL and the Pac-10, both of which recently closed deals with huge increases, competition among the bidders forced the prices higher.

Industry insiders don’t see a broadcast competitor emerging to fight the incumbents, CBS and NBC, for the tour’s rights. ABC and Fox are considered unlikely to make a play for the package.

Perhaps the competition could come from within. With Comcast/NBC owning Golf Channel, industry sources say NBC could make a play for more tour events. Under the current arrangement, CBS takes 20 events and NBC has 10 tournaments, among the PGA Tour events on broadcast networks.